ENVIRONMENT
CARBON REDUCTION COMMITMENT
The Carbon Reduction Commitment –
are you ready?
If you’ve just read the headline of this article with a puzzled frown, hopefully your organisation isn’t one of the estimated
20,000 that will be affected by the new Carbon Reduction Commitment (CRC) legislation
his climate change and energy-saving scheme is
Talready underway and, if you haven’t taken action yet,
there are some simple steps that you must take between
now and September 2010.
The CRC will directly affect around 5,000 UK
organisations by creating a league table highlighting
the best and worst performers in terms of carbon
emissions. Organisations with a total half-hourly metered
(HHM) electricity use greater than 6,000MWh (megawatt
hours) between January 1 and December 31,
2008 – equating to approximately £500,000 annual
spend - will have to participate. A price is being set on
carbon emissions, so those affected will have to buy
credits (or allowances) annually to cover their expected
emissions from April 2010. These credits will be recycled
back to organisations but adjusted according to each
organisation’s position in the league table.
If the possibility of adverse PR and reduced expenditure
on energy isn’t enough of an incentive to comply, the range
of fines and penalties for failures and non-compliance
should be – at their worst they include up to three years’
imprisonment. Ignorance is no defence.
For the additional 15,000 organisations, the
responsibilities under the CRC have only recently
become apparent following the latest and third
consultation on the “Draft Order” of the CRC. Companies
with a consumption of between 3,000 and 6,000MWh
will have to take steps to calculate their consumption
and produce a footprint report to the regulator, to prove
they are exempt and to identify those close to the
threshold. Failure to comply will incur a £1,000 fine.
At a time when lending is non-existent and cash flow
is critical to survival, the up-front cost could push many
companies into the red, or even into insolvency.
The CRC consultation pack indicates that, in April 2011,
organisations will have to buy two years of allowances,
at once. On the plus side, companies will be able to
trade throughout the year, providing the opportunity
to sell surplus credits.
It’s a worthwhile scheme, but it’s arrived at the worst
possible time. Early preparation is going to be vital, so
ENVIRON has outlined five steps to help you to comply,
to ensure you avoid the pitfalls and potentially make you
money or even exempt from the CRC.
STEP 1 – DO YOU NEED TO PARTICIPATE?
It is the highest level of the organisation that must
comply with the CRC obligations. This could be a
company’s group HQ, bank or an investor with a major
stake in a business. The franchisor of a chain of franchisees
is also obligated. Where the owning parent is overseas, a
UK ‘primary member’ needs to be nominated and will be
responsible for compliance.
All central and local government energy consumption
will be liable, irrespective of the 6,000MWh threshold.
If your energy consumption and emissions are for transport
purposes or generating electricity then you’ll generally be
exempt. If you already fall under the EU ETS (European
96 July / August 2009
Union Emission Trading Scheme) or over 25 percent of your
emissions are covered by a CCA (Climate Change Agreement),
these installations will also be exempt from full participation. If,
however, an organisation owns businesses that are neither in
the ETS or CCA, then these could fall under the CRC.
At its most simplistic, the CRC applies to those with
tariff half-hourly electricity metering - most businesses with
sites with an electrical demand of over 100kW. But your
company might have voluntarily installed half-hourly meters
(HHM) even in sites with lower consumption; after all, HHMs
provide accurate bills and obvious energy management
incentives. If they were in place during 2008 then you are
obligated under the CRC.
STEP 2 – WHAT DO YOU NEED TO DO?
First, find out what data you need to collect and when
reports are required. The CRC includes electricity, gas, oil,
coal and LPG consumption, and good quality data can
take months to gather.
Organisations need to instigate monthly meter readings
now so they can compile reports by the end of July 2011
and calculate a realistic annual consumption estimate.
Failure to do this could lead to an inflated and more
expensive estimate. The Environmental Agency (EA) will be
the CRC Regulator in England and Wales, SEPA in Scotland
and NIEA in Northern Ireland, and they are likely to audit 20
percent of organisations annually. Keeping an accurate CRC
evidence pack is vital to avoid heavy fines.
A word of advice when calculating future usage, take
into account any changes to your business especially in
the current economic climate. Consolidation, expansion
and diversification are all likely to affect your emissions.
The CRC’s growth metrics account for such changes.
STEP 3 – EARLY ACTION
Early Action Metrics have been included to reward
companies already managing emissions and encourage
others to follow suit before April 2010. You are still in time to
benefit from this but only if you act soon.
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